Research – VAT treatment

Previously, a supply of research between eligible bodies was exempt from VAT. With effect from 1 August 2013, that exemption was removed. However, as part of the transitional arrangements, the exemption continues to apply for supplies under contracts which were entered into before 1 August 2013 to the extent that the services fall within the scope of that contract. HMRC provides further details of this within Revenue and Customs Brief 21 (2013).

The removal of the exemption means that it is now of greater importance to identify what research income represents payment for research services (typically standard rated) and what research income represents grant-funded research (outside the scope of VAT). HMRC recognises the importance of correctly defining research income and provide further guidance in Revenue and Customs Brief 10 (2013) and VAT information sheet 11/13.